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Data released on Friday, showed real GDP contracted in Canada at an annualized rate of 8.2% during the first quarter. According to National Bank of Canada analyst Krishen Rangasamy, the horrible handoff from March and an even uglier April, suggest an even deeper decline for real GDP in the second quarter.

Key Quotes:

“The two-week lockdown in March not surprisingly pummeled Canada’s real GDP in the first quarter. With shopping being restricted, the consumption decline was the worst on records as Canadians were forced to save ─ the savings rate soared to a 19-year high during the quarter. While the latter should help support consumption in Q2, the hit to household incomes due to unprecedented job losses will provide an offset and limit spending.”

“There is also further downside potential for business investment considering the sharp drop in corporate profits in Q1, persistently weak commodity prices, and enhanced uncertainties about the economic outlook.”

“While a rebound is likely in the second half of 2020 as more of the economy reopens and firms rebuild inventories, that won’t make up for the first half collapse in economic activity, leaving Canada with the worst annual GDP contraction on records. And that despite unprecedented fiscal and monetary policy stimulus.”